June 17, 2013

The $7.5 Billion Ad Swindle

There are two outrageous scams going on simultaneously in adland. They are interconnected and both are related to banner (or display) advertising.

The first scam is the unscrupulous selling of online display ads.

The second is the tacit cover-up of frauds perpetrated by online ad networks and ad exchanges.

First, the sales scam.

A recent study by comScore, reported in The Wall Street Journal last week, found that 54% of display ads paid for by advertisers between May 2012 and February 2013 never appearedin front of a live human being.

Even the ads that "appeared" weren't always visible. Among the ads that actually "appeared," the criteria the research company used for considering an ad "visible" was ludicrous. If half the pixels were viewable for one second, the ad was counted as "visible." The industry itself, as represented by the Interactive Advertising Bureau (IAB), has no standard for determining if an ad is "visible." The issue with "visibility" occurs because a banner ad that may technically "appear" on a page may not be visible to a person who does not scroll up or down to that portion of the page, or the ad may not load while the person is viewing that portion of the page.

In plain English, this means that over half the ads that advertisers paid for, in essence, never ran. And among those that did run and were deemed "visible," an undetermined number weren't.

But that's not the most disturbing part. If companies want to piss away their money on worthless crap, that's their business. If they're too stupid to know what they're buying, they deserve what they get.

The disturbing part is the tacit cover-up.

Can you imagine the outcry if it was found that
gas pumps were showing 20 gallons pumped when they were only pumping 10
gallons?

Can you imagine the riots that would occur if it was found that banks were embezzling half the money from their depositors?

That is exactly what is going on in the world of display advertising. Half of what is being paid for is apparently being stolen. And of that which is not being stolen, an unknown amount is apparently worthless. And nobody seems to give a damn.

Nobody's been fired. Nobody's been sued. Nobody's gone to jail.

Incompetent, greedy agencies, and crooked online ad hustlers are just going about their business as if they hadn't screwed advertisers out of billions of dollars. Pathetically clueless CMOs are keeping their heads down and pretending they don't know.

Where's the outrage? Why are the victims of this fraud not holding their agencies responsible? Why is the press not reporting on this? Why isn't this front page news in every trade journal and website?

This is the biggest advertising story of the decade, and it's being buried.

The day after The Journal ran their story, I checked Ad Age and Adweek. I couldn't find a single mention of it. I found stories about hot dog eating contests, and Rupert Murdoch's divorce, but not a peep about the multi-billion dollar swindle being perpetrated on advertisers. (In fairness, Adweek has done some quality reporting on this story. But their reporting has put the size of the fraud at about 5% of what it may actually be.)

Here's why nobody wants to know too much.

How does an agency answer a client who asks, "You mean more than half the money you were supposed to be custodian of was embezzled from me and you knew nothing about it?"

How does an ad network answer, "You mean all those clicks and eyeballs you promised me never existed, and you knew nothing about it?"

How does a CMO answer his management when they ask, "You mean these people screwed us out of hundreds of thousands (millions?) of dollars in banner ads and you had no idea what you were buying?"

Everyone is in jeopardy and everyone is in "protect" mode. Everyone wants to maintain deniability. Nobody wants to know too much.

If display advertising were to suffer the disgrace it deserves, imagine the fallout.

Imagine the damage to agency holding companies whose "trading desks" are
buying online media at one price, marking it up, and selling it to
their clients at a higher price. The justification? They're "adding
value." How's that for a laugh?

Imagine the damage to Facebook, which at last report gets over 80% of its revenue from display.

If the comScore findings are correct and projectable, it means that of
the 14 billion dollars spent on display advertising last year in
America, 7.5 billion was worthless and constituted some degree of fraud or misrepresentation.

"Everything about online advertising is corrupt...The promises are corrupt. The data is corrupt. The suppliers are corrupt. And the buying and selling is corrupt...This industry is in desperate need of investigation."

Will the advertising industry be successful in its ongoing attempts ignore or bury this story? I don't think so. Soon enough someone big, smart and influential is going to realize what's going on and all hell will break loose.

Our vision at http://influads.com is to be quality and ethical focused ad networks, which others don't seem to care about. We see this when working with intermediaries that simply do not care about quality metrics, instead focusing on serving traffic, the "trading desk"-styled incentive that you mention. Being ethical have been putting us into some uncomfortable situations.

Part of the problem also relies on the underlying way of serving ads. HTTP and javascript don't necessarily grant delivery: Ad networks have been historically ignoring that since it's the most convenient way of democratizing advertising, democratization which scaled that problem.

Does your website have a contact page? I'm having problems locating it but, I'd like to send you an email. I've got some ideas for your blog you might be interested in hearing. Either way, great site and I look forward to seeing it expand over time.

If there's something I've learned about advertising over the years, it's that ethics are inconsistent. Different parts of the business don't understand other parts well enough to call people out on their bullshit. It requires that every discipline in the loop be responsible for itself because no one else is going to be able to tell if they aren't.

If I, as a creative, come up with a concept and then essentially mail it in afterwards, there are very few people outside of the creative department that will ever know. The end product will suffer, obviously, but I can then blame it on where it was run, when it was run, that it was watered down during the production process and so on.

To your point, Bob, being held accountable is the only way to avoid this. The problem is that when you start holding people accountable, they start doing the same for you. And apparently, that is too uncomfortable for most.

Let me start by saying, great post. I wonder what a similar study of, say, newspaper advertising would reveal, though. Obviously, there are different rates and demos for the Sports section vs. the front page section, and for page 2 vs. pg 6, etc., but do advertisers get what they pay for in that channel? Or is it more a question of measuring response (did more people come to the store after the ad was purchased than before) than whether or not X number of people actually saw the ad (or even purchased a paper on a given day)?

I don't disagree with your concerns, but I think they a component of the process, in the sense that buying an ad on, say, Grantland.com has a known rate of success and the market determines what that rate of success is worth. Not so much the 'views', but the return.

Where I'm more perplexed is around the question of digital/interactive measurements, period. Isn't the big selling point of online or interactive advertising supposed to be that the metrics can be much more granular, much more precise, and much more timely?

I'm not so naive as to think 'digital' would ever take all the uncertainty out of the process. But right now, based on your post, it seems we have the worst of all worlds. Add to that the fact that most 'digital' ads are still awful and almost anti-compelling, and you have the trifecta of modern advertising: Crummy creative placed haphazardly, giving bad results that aren't accurately quantified.

PS: "Can you imagine the riots that would occur if it was found that banks were embezzling half the money from their depositors?" I think we can all imagine that, and we know what would happen. The bankers would get bigger bonuses and, somehow, the depositors would be indicted for enabling the embezzlement by depositing money in the first place.

If my campaign costs $5,000 and I can see that it resulted in $10,000 in revenue, or 40 quality leads, or 8,000 new Facebook fans, I can make a pretty solid estimation of the ads' value. You make a strong argument for measuring online ads in terms of cost-per-conversion rather than per-click or per-view, but don't go too far and imagine that this discredits online advertising altogether.

Bottom line, if you buy ad space the ad should be viewable. Whether or not someone scrolls down to see it, if it makes it to the rotation when you’re on the page – well that’s the advertiser’s call if they want tospend ad dollars that way.

Now, if a spot doesn’t run on TV or radio, or the ad doesn’t appear in the newspaper or magazine – due to the broadcaster’s or publisher’s omission – you get a make-good. So far I haven’t found any hidden TV channels or hidden pages in my newspaper or magazine where an ad for The Pocket Hose runs.

We need real proof of run for digital.

The scammers should be driven out of business. The only way to do that is for advertisers to wisen-up. Accountability starts there. You’re spending your company’s Ad Dollars on stuff in the digital universe – and you, the one who is approving that spend, should be prepared to answer for it.

Imagine what the interwebs would look like if the publishers had to post all the make-goods and they actually appeared? Yeow!

BTW there’s an interesting piece in Luxury Daily about the effectiveness of newspaper and magazine in the affluent market. Just sayin’ – traditional channels aren’t dead.

Excerpt form Digiday article:" Slideshows result in a ton of pageviews, which increases banner ad impressions, which, in turn, makes advertisers feel like they got more eyeballs than they really did. Publishers that want to ban these annoying slideshows are trapped. Their pageviews would plummet if they did, and when your business model is built around banner ads, that’s real money. But when your business is focused on sharing and providing a native content platform for brands, you don’t want juiced pageviews. You want happy readers, because happy readers share."

"You're conveniently leaving CPC vs CPM aside" - they are relevant only if the ad gets displayed. Did you even read the post ? If ads don't get displayed, then why do ad networks charge their clients ? Simple basic question - and you're trying to obfuscate the whole issue.

I'm not "math man" but I used to work in media years ago in the UK. Sold airtime for ITV. And you don't have to be Martin Sorrell to have noticed that all the websites that sell "airtime" on the web now get bugger all traffic. I'm now only "watching" Facebook, Twitter, Reddit and that random wacky site that I like. None of which, I'm guessing, are sold by the online media wholesalers. It's a simple attention thing. their inventory is simply worthless. The UK TV equivalent of the center break in Countdown on Channel 4 circa 1992.

While I generally adore everything about this column, Bob, I would take partial umbrage with the above (not the zapping of the shiller of course. That's okay).

Caveat - I am a digital marketer, but I like to think of myself as one of those rare ones who practices critical thinking. This often puts me at odds with clients and superiors who make horrendous decisions based on some shit-eating huckster's TED Talk and then expect me to turn crap strategy into gold.

Anybody who has actually done serious, meaningful analysis of digital data knows that there is a lot of it that is horse manure. Some of what passes for data collection is outright criminal. I think you should be allowed to excuse yourself from any meeting where data from Compete.com is used to justify *any* decision.

The reason that this story isn't getting much play is that in the digital world, we've all seen this movie before. We can create a data channel for it. "OMG - a digital media/software/younameit vendor is fudging numbers and not delivering on a promise? STOP THE PRESSES!"

On an ethical level, your outrage is justified. The amount of people who will take money in this space without delivering commiserate value is revolting. Those people should be pilloried.

But.

There's a simple solution to this problem on both the agency and client side - hire a fucking business/data/grownup analyst.

Legitimate digital analysts realize there is a lot of horsecrap data. But not all of it horsecrap. Some is partially horsecrap. And some is complete horsecrap.

No digital analyst who knows what they're doing will take the metrics provided by any vendor, whether it's an ad network, Google Analytics, you name it at face value.

But that's a solvable problem. If you know that your data has limitations, you employ a variety of statistical and analytical techniques to get around it.

Any company with a legitimate analyst should have picked up on any number of signals that these ad networks are underperforming (due to the shorting of impressions). Things like "no difference in sales/leads generated" during banner flights, "no impact on ad recall", etc..

I've run some banner campaigns that have worked great and some that have worked poorly. The biggest thing is that if you're letting "impressions" or "clicks" define success, you're setting yourself up for pissing away money, even on legitimate ad networks.

To an extent, the B2B space (in this instance, the agency/client relationship, but can basically be any B2B/client relationship) is riper for fraud and abuse than anything this side of plumbing and auto repair. That's why I don't take cold calls from salesmen, and I'm guessing you don't either.

Bottom line.....it sucks, it's unethical, insert your pejorative here. There are, however, legit networks and means of advertising in this space, and it feels like you're throwing the baby out with the bathwater (cognizant of the fact that the bathwater absolutely needs to go).

Whilst I agree this could have caught some people unaware the lack of coverage is mainly because for a lot of online marketers this isn't news. Impressions are the least important metric in online marketing and they always have been.

Unlike other offline media where impressions are everything and reaching X amount of people is the main statistic almost all online marketing is valued on clicks and conversions. The data on impressions has always been awful (just look at the click through rate of adverts on Facebook) because you can't guarantee everyone saw the advert completely.

In a print magazine can you guarantee the entire readership saw the advert? What if they skimmed past it in one second? Does that count? With a TV advert was everyone in the room when it aired? It's the exact same problem.

In addition many platforms use Cost per click models rather than CPM in which case the number of impressions is less important when you are only paying per click. If you value your adverts based on the clicks and conversions you get the number of impressions is not important, value generated is.

The real issue here is lack of accountability. If it doesn't show leads generated then stop doing it. Despite working in ads and marketing I actively avoid them whenever I can. Most of them aren't worth the pixels they are using.

I agree with Damiensen (ignoring his company plug). The root of the problem is that display ad visibility is technically very difficult to measure.

Also, online CPM advertisement pricing is extremely demand-driven. That price you're paying for CPM is already adjusted for this problem, because the pricing is based on willingness of buyers to pay that price (which is in turn based on product's effectiveness). The demand is extremely elastic.

And if you're losing money by investing in CPM, then stop investing. If it's making you money, then keep doing it. If you aren't tracking that, you should be.

Ad Contrarian Says:

"Delusional thinking isn't just acceptable in marketing today -- it's mandatory.""Good ads appeal to us as consumers. Great ads appeal to us as humans."

"Social Media: Tens of millions of disagreeable people looking to make trouble."

"As an ad medium, the web is a much better yellow pages and a much worse television."

"Marketers prefer precise answers that are wrong to imprecise answers that are right."

"Brand studies last for months, cost hundreds of thousands of dollars, and generally have less impact on business than cleaning the drapes."

"The idea that the same consumer who was frantically clicking her TV remote to escape from advertising was going to merrily click her mouse to interact with it is going to go down as one of the great advertising delusions of all time."

"Nobody really knows what "creativity" is. Every year thousands of people take a pilgrimage to find out. This involves flying to Cannes, snorting cocaine, and having sex with smokers."

"Marketers habitually overestimate the attraction of new things and underestimate the power of traditional consumer behavior."

"We don’t get them to try our product by convincing them to love our brand. We get them to love our brand by convincing them to try our product."

"In American business, there is nothing stupider than the previous generation of management."

"If the message is right, who cares what screen people see it on? If the message is wrong, what difference does it make?"

"The only form of product information on the planet less trustworthy than advertising is the shrill ravings of web maniacs."

"There's no bigger sucker than a gullible marketer convinced he's missing a trend."

"All ad campaigns are branding campaigns. Whether you intend it to be a branding campaign is irrelevant. It will create an impression of your brand regardless of your intent."

"Nobody ever got famous predicting that things would stay pretty much the same."